Constellation to tap into draught beer sales
Corona’s previous Mexican owners should be tugging their forelocks. Their previous partner and now owner of Corona in the U.S., the wine-to-beer company Constellation Brands, has shown that Corona does very well on draught.
Historically, Grupo Modelo’s strategy for Corona in the U.S. did not involve selling it on draught. Perhaps it was a point of pride with its distinctly painted clear glass bottles or the gimmick of pushing a slice of lime down the bottle’s neck before drinking the beer, but whatever the reason, Grupo Modelo would have none of a draught offering.
However, when Constellation Brands acquired Grupo Modelo’s U.S. beer business from Anheuser-Busch InBev in June 2013, and took over the 50 percent stake in Crown Imports it did not yet own, one of the first things it did was to put all the Modelo brands on tap. The test-market trial was so encouraging that Constellation Brands is planning a nationwide rollout this year.
Constellation Brands now gets no more than 3 percent of its beer sales from draught, compared to 10 percent for the U.S. industry as a whole, but it has the potential to generate as much as 10 percent of Constellation’s total business over time. Already, draught sales for Modelo brands have soared 30 percent in the third quarter ended 30 November 2013, Chief Executive Officer Robert Sands said on 8 January 2014. “We probably expect Corona Light to be our biggest draught brand,” Mr Sands was quoted as saying.
Constellation Brands, the seller of Corona beer, Svedka Vodka and Robert Mondavi wine, reported some heady third quarter results, driven largely by the Crown acquisition. Constellation’s net profit rose to USD 211 million in the third quarter from USD 109.5 million a year earlier. Revenue climbed to USD 1.44 billion (+88 percent) as beer sales increased by 21 percent.
Good results come even though Constellation’s wine and spirits segment turned in a lacklustre performance. Wine and spirits sales were 3 percent higher in the quarter, but because of higher promotion and marketing costs, operating income declined year-on-year and Constellation expects full-year operating income for wine and spirits to be flat to slightly down.
Incidentally, Corona sales were growing despite the largest brewers seeing their volumes decline. Constellation Brands thinks it can perform just as well as the craft brewers, whose sales are up too, without having to resort to faux craft beers as AB-InBev and MillerCoors have done.
Craft brewers should watch out for Corona on tap. They often need to do a lot of convincing to get their beers that no one has heard of put on tap. Corona enjoys the benefits of name recognition and the ability to generate sales. Seems like Constellation is quite prepared to step on many craft brewers’ toes in the competition for taps in the U.S. on-premise market.
